Q1 2025 Clearway Energy Inc Earnings Call
It will contain forward looking statements, which are based on assumptions that we believe to be reasonable as of this date.
Actual results may differ materially.
Please review the Safe Harbor in today's presentation as well as our risk factors in our SEC filings.
In addition, we will refer to both GAAP and non-GAAP financial measures for information regarding our non-GAAP financial measures and reconciliations to the most directly comparable GAAP measures. Please refer to today's presentation.
In particular, please note that we may refer to both offered and committed transactions in todays oral presentation and also may discuss such transactions. During the question and answer portion of today's conference.
Please refer to the safe Harbor in today's presentation for a description of the categories of potential transactions and related risks contingencies and uncertainties with that I'll hand, it over to Craig.
Craig: Thanks, the keel turning to slide four.
Craig: Clearway delivered solid first quarter results across all segments, putting us in good standing to meet our 2025 financial objectives. We.
Craig: We have reaffirmed our 2025 guidance range and if we can see typical annual resource for the remainder of the year and continue to deliver strengthened fleet performance. We have line of sight to achieving the top half of that range or even better through contributions from newly committed investments.
Craig: We also continued to execute on initiatives that will enable future long term growth in our business and are pleased to note that we made progress in each of the growth pathways, we have established for <unk>.
Craig: In fleet enhancements sponsor enabled dropdown investments and asset Center third party M&A.
Craig: First in our fleet, we continued to drive previously identified repowering opportunities forward and added still more identified opportunities this quarter for.
Craig: For the previously announced non storm Repowering, we signed the projects revenue contract with Microsoft and the project is advancing towards the startup construction in 2025.
Craig: The Repowering remains on track to achieve commercial operation in phases in 2026 and 2027.
Craig: We are pleased to also announced that a potential repowering of goat mountain in 2027 is now advancing within awarded PPA that can enable an accretive investment proposition and meaningful expansion of the facility side.
Craig: Lastly, we continue to advance development of our Repowering at San Juan Mesa and signed the PPA extension for the project to serve as a bridge to a future repower targeted for 2027.
Craig: Another growth pathway sponsor enabled dropdown growth also remains resilient and saw further advancement during the past quarter.
Craig: All of <unk> committed growth remains on track for completion schedule is aligned with previous public disclosures.
Craig: Clearway group continues to develop an abundant pipeline of over nine gigawatts of C. When compatible late stage projects that has now been further reinforced with additional safe Harbor investment.
Craig: Clearway group is now on pace to complete safe Harbor investments for approximately 13 gigawatts of projects that could achieve through 2029, which maximizes optionality relative to what the enterprise plans to build over that timeframe.
Craig: This advancement includes battery projects within the late stage pipeline due to thoughtful planning and collaboration with our PPA customers and equipment suppliers on tariff risk sharing.
We are now officially naming the spindle project, a 199 megawatt battery storage project, which signed a long term contract with an investment grade utility in mid April.
Craig: Asset centered M&A also continued to be a complementary avenue for us to pursue to meet our cap <unk> per share growth objective.
Craig: We are pleased to announce that we closed the <unk> acquisition in recent days. We are also pleased to announce that we have signed a binding agreement to acquire an operational solar project in California that is nearby a large cluster of other clear assets in the area and a further.
Craig: Construction of our ability to thoughtfully apply operating synergies to add complementary high quality assets to our fleet.
Craig: Further reinforcing confidence in our outlook, we've mitigated interest rate risks for the refinancing of our corporate bonds scheduled to mature in 2028 with opportunistic hedging of base rates that Sarah will discuss in her section of the prepared remarks.
Craig: Through all of these actions and more we are positioning the platform to potentially achieve the high end or better of our 2027 cap do you per share growth target.
Craig: We are proud of how we've continued to execute since last quarter's earnings call on a redundant growth pathways, providing further visibility into how we will accretively grow Clearway energy, Inc. While evolving the company to be increasingly self funding over time.
Craig: Turning to slide five.
Craig: Progress continues on attractive repowering that we expect to extend and enhance the value of our existing owned wind fleet.
Craig: <unk>. The three named Repowering is on this slide are providing solid building blocks for our <unk> per share growth outlook beyond 2027.
Craig: The previously announced Mount Storm Repowering continues to advance with wind wind PPA terms accommodative of the current policy environment.
The project is also completed key permitting milestones in place the turbine order with Vestas.
Craig: Goat mountain targeting a repowering in 2027% to expand the facilities capacity to 301 megawatts.
Craig: Our projects expanded capacity will be enabled by major permits that are already secured.
Craig: And then awarded PPA that is in the process of final negotiations on terms, which allow for it to be advanced accretively in today's supply chain environment.
Craig: Finally, San Juan Mesa is another repower and we are targeting for completion in 2027.
Craig: It's advancing and PPA extension with the current off taker, which will serve as a bridge to a future repower at Clearway group is advancing development activities that could set the project up for construction in 2027.
Craig: In the coming quarters, we are hopeful that we can disclose additional details and official commitments to these next two targeted repowering is subject to customary applicable caveat, including the requirement for review by <unk> governance conflicts and nominating Committee.
Craig: As a reminder, repowering and our fleet enhancement program, our underwritten to extend the assets useful life improve its risk profile and drive caf fee growth incremental to our baseline forecast for EBITDA and Kathy contribution from these projects prior to Repower.
Craig: In aggregate, we have re powered or committed to Repower 712 megawatts of our wind portfolio and look to increase that amount in the coming years.
Craig: Based on rigorous analysis with a core focus on maximizing shareholder value will continue to enhance our wind fleet through either future capital light contract extensions or contracting to underpin our potential repowering.
Craig: Turning to slide six.
Craig: Our sponsor enabled dropdown growth pathway is moving along nicely and further affirming our confidence in our growth outlook in 2027 and beyond.
Craig: All of Clearway group's projects with 2025 D are committed to see win and on track with substantially all equipment for the projects delivered long ago, and greener grid synchronization active as of today.
Craig: Commissioning work has begun ahead of commercial operations and <unk> has made initial funding based on milestones laid out in the investment commitment agreements with Clearway group.
Craig: Opportunities for <unk> investment in 2026, and 2027 CODI project Vintages also continued to advance including approximately one gigawatts of committed and identified potential dropdowns within those vintages.
Craig: Sure.
Craig: This includes the now named spindle storage project, which executed a 20 year PPA with the Colorado investment grade utility after the announcements of escalated tariff in April reflecting both the ability of the PPA to accommodate expense recovery of elevated tariffs and other actions, we have been able to take to mitigate that potential.
Craig: <unk> cost to rate payers. We also are continuing to advance development of the Rosemont, South two project, which provides vital and valuable mid term reliability for California, and for which we are collaboratively concluding a PPA negotiation with a valued historical customer.
Craig: Finally, we are continuing forward on construction of the committed honeycomb projects enabled by timely delivery of required equipment and nimble collaboration with our valued battery supplier an EPC contractor.
Craig: In sum thanks to our organizations trademark excellence in policy aware project development, we've been able to implement a combination of mitigation factors to ensure projects stay on track to provide cost effective and reliable power to customers.
Craig: Off takers are acknowledging the value of ready to build projects and the importance of strong franchises backing them and contracting arrangements. We have reached an awarded and signed agreement even after the recent announcements of elevated tariffs.
Craig: We continue to find ways to assure adequate project investment returns, while also delivering a solid value proposition for our customers.
Craig: Furthermore, our equipment procurement as either thoughtfully been sourced from domestic sources <unk> benefited from relationships with key suppliers understanding the current macro and policy backdrop, when setting procurement term.
Craig: Through collaborative application of these mechanisms and excellence and project implementation and financing we have been able to sustain forward progress on sponsor enabled growth and are enormously proud of what that says about the resiliency of our very capable enterprise.
Craig: With this backdrop not only does our outlook for growth in 2027 continued to firm up but the outlook beyond that remains robust clearway group's late stage pipeline through the 2029 vintages has over $750 million of potential corporate capital investments beyond already offered and committed project.
Craig: These vintages through 2029 are now on track to secure qualification for tax credits for approximately 13 gigawatts of projects our strategy with <unk>, which is intentionally over collateralized needed tax credit qualification for project sites across clearway group's pipeline relative to the Enterprise's project build.
Craig: Out plans over that timeframe.
Craig: Turning to slide seven.
Craig: Since our last call. We have once again also made steps forward on value accretive M&A.
Craig: We signed a binding agreement to acquire an operational solar project in California that has an existing long term PPA that currently extends into late 2038.
Craig: The asset is also complementary to our fleet given its proximity to existing <unk> assets and also presents optionality for our future potential battery hybridization.
Craig: The transaction, which is expected to close in 2025 is expected to generate an approximately 10% to 11% five year average annual cap yield and a 13% 10 year average annual Cathy given the cap the profile of the project.
Craig: Turning to slide eight.
Craig: We're in a strong position to achieve the top end or better of the 2027 cap your per share target range that we set given the incremental updates on growth pathway share today combined with past updates we.
Craig: We had previously provided visibility into how we could reach the midpoint or better of the $2 40 to $2 60, Kathy per share target. We set for 2027 through previously committed growth investments contracted and observe pricing levels for revenues and our flexible generation segment and our assumed plans for.
Craig: The refinancing of our 2028 maturity bonds, which have been firmed up by way of recent hedging activity.
Craig: We now see path to the top end of our 2027 cap you per share range or better given today's third party M&A ingredients for an operational solar projects, along with continued solid execution across our redundant growth pathways to.
Craig: The deployment of additional capital as one clear.
Craig: Clearway group's pipeline has additional potential dropdowns in stores that have not yet been offered such as spindle and the targeted repowering that could allow for the deployment of capital at sufficient levels to meet the top end of our 2027% range or better.
Craig: We also continue to remain active in evaluating further third party M&A opportunities through which we could also deploy capital and finally, we continue to pursue additional fleet optimization improvements such as accretive revenue contracting and our flexible generation segments.
Craig: So all in all we continue to believe we are in a position of strength when it comes to executing towards meeting our 2027 financial objectives with that I'll turn it over to Sarah for the financial summary section.
Sarah: Thanks, Craig.
Sarah: Slide 10, we provide an overview of our financial results.
Sarah: We are pleased to report first quarter, adjusted EBITDA of $210 million and Kathy at 77 million, our first quarter results reflect strong wind resource in California.
Sarah: <unk> from 2020 for growth investment.
Sarah: In addition, our first quarter Cathy is higher than seasonally expected due in part to timing of debt service and distributions to noncontrolling partner it shifted into the second quarter.
Sarah: It has to be faster for our renewable and storage segment improved by four 7% to 25, 7% first of all there.
Sarah: And by two 9% to 33, 9% for Wayne.
In addition, our flexible generation availability improved by 3% to 89, 3%, continuing our trend providing strong availability and grid reliability in California.
Sarah: We continue to reiterate our 2025 cap the guidance range at $400 million to $440 million with a target to achieve the higher end of the range. We had secured several of our previously described building boss can achieve this target.
Sarah: Recently, completing the acquisition of two on the wind farm in Washington.
As well as completing the timely dropdown and initial funding and then fab.
Sarah: 257 megawatt solar plus storage facility in California. During the first quarter of 2025 and this project is on track can achieve <unk>.
Sarah: And be fully funded later this year.
Sarah: In addition, initial funding Luna Valley solar and I get one storage remains on track and is also on track to achieve EOD and be fully funded later this year.
Sarah: Continued to maintain disciplined focus on the availability of our entire fleet as well as the management of energy margins for our flexible generation fleet.
Sarah: Our guidance range reflects P 50, renewable production expectations at the midpoint with the upper and lower end of the range, reflecting variability in potential outcomes for resource and availability.
Sarah: Moving to slide 11, we remain well positioned to fund our planned growth in a prudent manner, we expect to generate 250 million or more of retained Kathy from 2025 to 2027 that we expect will be utilized to fund a portion of our committed.
Sarah: In that sense.
Sarah: In addition, applying a corporate debt to EBITDA ratio consistent with our target of four to four five times to our projected forward looking that Jay yield estimated excess debt capacity of approximately $400 million are greater.
We expect to utilize a portion of this debt capacity along with retained cash.
Sarah: To fund our committed growth investments, which will allow us to achieve our targeted tap fee per share goals in 2020 and beyond.
Sarah: Our strategy continues to assume that we will opportunistically and predictably issue modest amounts of equity in order to fund accretive growth to facilitate the achievement at the top end or better of our growth target.
Sarah: We expect to do these small targeted equity issuances through the use of an ATM facility.
Sarah: This will allow us to issue equity over time.
Sarah: Clients and representing only a small percentage of our public float.
Sarah: Similar to what you see in the listed utility.
Sarah: As part of routine at keep for our ATM program. We plan to make filings later this year to ensure the program is ready for accretive and opportunistic equity issuances subject to market condition.
Sarah: We expect to regularly utilized our revolving credit facility, which is largely undrawn as the source of temporary liquidity, while we complete longer term financing for our growth investments.
Sarah: As we look to put in place longer term corporate financing for growth investments and plan for the refinancing of our corporate bonds.
Sarah: The earliest maturity in 2028.
Sarah: Looking to mitigate the risk of interest rate volatility by hedging certain notional amounts with forward starting interest rate swaps that will take the phase III for the intended refinanced bonds.
Sarah: He recently executed forward starting hedges for the majority of the principal amount of our $850 million corporate bonds at the earliest maturity and we will look to hedge incremental notional amounts if the markets are supportive of this.
Sarah: Hedging strategy will help us to manage potential interest rate volatility and further support our ability to meet our growth target.
Sarah: We are pleased to approach our growth strategy and related funding plan from a position of strength and balance sheet and liquidity and with a focus on risk management and financial discipline.
Craig: Now I will turn it back to Craig for closing remarks.
Craig: Thanks Sarah.
Craig: Turning to slide 13.
Craig: To recap.
Craig: <unk> delivered strong first quarter results with currently forecasted timing of committed growth investment contributions firming up our path to meet or exceed the 2025 cap D guidance range is also unclear view.
Craig: Committed dropdowns continue on track and are expected to deliver accretive growth to cys.
Craig: Additionally, we've signed another binding third party M&A agreement for an operational solar project at attractive economics.
Craig: <unk>, we are solidifying multiple pathways towards the top end of the 2027 cap fee per share range and are on track to meet Dps growth objective.
Craig: When thinking about our outlook beyond 2027 are very capable organization is working tirelessly for further long term value creation.
Craig: We continue to aim to accumulate further growth pathways from dropdown offers from Clearway group's development pipeline further repowering and hybridization opportunities.
Craig: Selective third party M&A.
Our capital allocation framework, we will see us continue to allocate capital to the highest return investments available to target a long term payout ratio trending towards 70% and pursuit of increasingly self funded growth.
Craig: And to make use of financial flexibility, we create and maintain through prudent.
Craig: Within that framework, we will pursue growth towards extending our goal of 5% to 8% long term cap per share growth.
Craig: In view that goal as something we can sustainably meet.
Craig: Finally, we will continue to be data dependent and attentive listeners to the investment community about what we can do to it.
Craig: To enhance our investment proposition as we look to present one of the most compelling investments available within the listed infrastructure universe.
Speaker Change: Operator, you may open the lines for questions.
Speaker Change: Thank you as a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced towards the draw. Your question. Please press star one one again, please stand by while we compile the Q&A roster.
Speaker Change: Our first question comes from the line of Julien Dumoulin Smith from Jefferies.
Speaker Change: Hey, good evening. This is Hanna velasquez on for Julien.
Speaker Change: <unk> on the quarter I had two questions. So first on battery storage. How are you thinking about that as part of your pipeline going forward and I know you are advancing with some of the projects through 2026, but how are you thinking about thereafter and I also know separately the sponsor can absorb to some extent some of the <unk>.
Speaker Change: <unk> impact, but it also sounds like you might be sharing.
Speaker Change: Some of the cost of the higher cost does that mean beyond 2026. If you do pursue further storage projects. You. My continued caution here or you might look for a non Chinese supplier or you might altogether, just slow down on post 2026 storage projects.
Speaker Change: Yes.
Speaker Change: Thanks for the questions I appreciate the recognition of the strong quarter.
Speaker Change: So.
Speaker Change: On the second of those questions first.
Speaker Change: We really like this technology and what it delivers for the system.
Speaker Change: Now being in a position, where we can see a sizeable fleet of batteries.
Speaker Change: Our operating portfolio.
Speaker Change: Our tremendously reliable generators of revenue for us given the way that we structure revenue contracts on them and I think we've been very savvy about the approach we've taken to design engineering and commissioning of those resources.
Speaker Change: If you look on any given day at our operational dashboards.
Every one of these resources as green and exceeding our underwritten expectations for their performance and in the <unk>, where they're contributing now.
Speaker Change: Both from our fleet and from others, they've had a really appreciable beneficial impact on reliability.
Speaker Change: As well as for repair costs and systems like Texas in ERCOT and queso over the last few summers. So we think batteries have any central bright future here not just in 2026, and our business, but all over the U S and.
Speaker Change: We're proud of what we did for the projects that we've got an execution now.
Speaker Change: Through the combination of delivery schedules and worked with our suppliers.
Speaker Change: And work with our customers to keep those on track.
Speaker Change: As we look out into the future we have a lot of good reasons to expect that those projects can continue to deliver the attributes that I just described.
Speaker Change: In a way that is compelling and value proposition.
Speaker Change: As you are alluding to there are.
Speaker Change: Numerous supply chains around the world that can support deployment into the United States.
Speaker Change: Which and to do so over time with China content that diminishes.
Speaker Change: I think we understand and support the decision structure that the U S. Government is looking to implement to encourage U S markets to purchase increasingly from sources that extend beyond China for this and other <unk>.
Speaker Change: <unk> of our economy, and we feel comfortable that with the leading quality battery suppliers, we engage with that that both there'll be able to support what we're implementing in 2026 and also what we would be implementing in 2027 and beyond.
Speaker Change: Even in today's tariff environment with the timeframe thats required to adjust our supply chain. So.
Speaker Change: We don't intend to slow that work down, but we plan to continue to execute it in a way that exhibits all of the same characteristics of prudence and craftsmanship that you see reflected in our results today, So thats sort of the first answer to your question around batteries in our pipeline.
Speaker Change: <unk>.
Speaker Change: I'm, sorry could you remind me back to the first of your two questions.
Speaker Change: No I mean that was exactly it was just mainly on how you were thinking about storage so that was super clear.
Speaker Change: Question will be shorter and hopefully easy to answer.
Speaker Change: Just in terms of 2025 guidance you all reiterated it and I know it was introduced maybe a couple of quarters ago and that was before you had close to illuminate and now you have this new third party M&A that you announced today. So could we see any I know youre getting at that youll be at the top end potentially of Guy.
Speaker Change: But could we see beyond that or are you thinking about potentially revising guidance down the line just because these two assets are missing for these two acquisitions.
Speaker Change: Yes, we understand the question Ali I'll give you a sort of a first statement of principles and then Sarah.
Speaker Change: Can fill in after after me.
Speaker Change: So I think.
Speaker Change: We understand the question.
Speaker Change: It is our intention to continue to assure that the.
Speaker Change: The expectations, we set with our investors are representative of what our own are.
Speaker Change: And at the same time, we're also mindful that we.
Speaker Change: We've just completed the first quarter of a year and a business that earns much of what it does in the second and third quarters, and we feel proud of the reliable execution and exceedance of guidance targets that we've set both in the short and the long run as an enterprise.
Speaker Change: And that pride is something we want to sustain with continued execution. So.
Speaker Change: So I think.
Speaker Change: As we.
Speaker Change: Increase our confidence around the final year outlook as a result of execution in successive quarters and timeline for closing I think that that will inform when we think we're confident enough to change the range that we've already set but Sarah I'll turn it over to you to fill in some of the details there.
Sarah: Sure I think you covered you covered it pretty well Craig.
Sarah: I think that we.
Sarah: We feel like we need to get through a little more of the year and actually.
Sarah: So we did.
Sarah: Close on one path and.
Sarah:
Sarah: Which we.
Sarah: We reflect in our range and then incremental.
Sarah: Until acquisitions, we would typically.
Sarah: Wait until those acquisitions have closed.
Sarah: <unk> that.
Sarah: We will track the closing of this additional acquisition as well as the other.
Sarah: There are factors that we'll see and.
Al.
Sarah: Maintain our operating fleet through the next few months and then when we get to a point, where we feel confidant.
Sarah: We would update the range if it were appropriate.
Sarah: Thank you.
Dan: Thanks, Dan I appreciate the support I appreciate the questions.
Speaker Change: Thank you. Our next question comes from the line of Justin Clare from Roth Capital Partners.
Justin Clare: Hey, Thanks for taking my questions.
Justin Clare: So I did want to follow up on the battery supply here just wondering for Clearway Energy group I was wondering if you could just speak to the potential to source batteries outside of China, whether that might be from southeast Asia other countries or domestically in the U S.
Justin Clare: Then if you could just speak to the <unk>.
Justin Clare: Level of the tariffs that can be absorbed here. So there is obviously very high levels in China.
Justin Clare: For those imports so wondering if youre planning to absorb a more modest level of tariffs and that can be shared.
Justin Clare: Just wanted to understand a little bit more about.
Justin Clare: How this is being managed.
Justin Clare: Yes.
Justin Clare: So first just sort of level of order of magnitude.
Justin Clare: Answers with respect to the totality of resource types that we deploy.
<unk>.
Justin Clare: There is certainly an increase in capital expense from project debt.
Justin Clare: Are implemented.
Justin Clare: Cross wind solar and batteries.
Justin Clare: At the levels that have been announced and that are applicable to entries into the United States today.
Justin Clare: For wind resources and for solar resources.
Justin Clare: They are pretty manageable in relation to current clearing prices for projects that can be constructed.
Justin Clare: In the near term.
Justin Clare: That are responsive to the needs of either load serving entities or commercial and industrial customers.
Justin Clare: For battery project.
Justin Clare: With more China, driven supply chain today.
Justin Clare: Instead of a capital expense increase of five or 6%. The currently enacted tariffs could have an impact on capex of about 30%.
Justin Clare: Yes.
Justin Clare: Yes.
Justin Clare: Hum.
Justin Clare: Yes.
Justin Clare: Okay.
Justin Clare: <unk> incorporated into customary financing structures the increase in toll rates that our project needs in order to produce a similar return is measured in single dollars per kilowatt month for a resource which.
Justin Clare: It's pretty important and necessary and a lot of places.
Justin Clare: Around the Western U S right now.
Justin Clare: And that's why it's been possible for us to continue to present.
Justin Clare: Revenues contract structures, our pricing to customers for battery projects that need to be delivered in the near term.
Justin Clare: And for those customers start to see a value proposition and procuring from those resources are agreeing to terms that would that would price potentially elevated tariff costs into the toll contracts that.
Justin Clare: That they will purchase power from.
Justin Clare: And then.
Justin Clare: We really considered the relationships, we have both with our constructors and our equipment suppliers important and collaborative.
Justin Clare: And for that reason.
Justin Clare: I would not get into tremendous detail about how together, we manage challenges like these but.
Justin Clare: The levers that we were able to pull together our schedules for deliveries.
Justin Clare: Approaches to commissioning and construction.
Justin Clare: The absolute sharing of cost of tariffs themselves and also the way that.
Justin Clare: That.
Justin Clare: <unk> prices on revenue contracts or financing structures can partly offset that for us both.
Justin Clare: By being able to.
Justin Clare: Either bring equipment into the country already before the tariffs were imposed or.
Justin Clare: Make use of the combination of those levers we've been able to keep all the projects planned for 2026 on track.
Justin Clare: To be able to deliver returns in an investment proposition to Clearway Energy Inc.
Justin Clare: Insistent with what's been announced already or what would be customarily targeted as we look out to the longer term.
Justin Clare: Hi.
Justin Clare: I think we have been a leader in driving.
Justin Clare: Increasing domestication of supply chains.
Justin Clare: As a company we've been buying panels made with U S produced poly silicon for years and years and years long before.
Justin Clare: It was something that policy demanded.
Justin Clare: Have pushed for domestication of wind turbine supply chain, we've done the same with batteries and a lot of the battery procurements we've executed.
Justin Clare: We're supportive of some of the first large scale manufacturing.
Justin Clare: Manufacturing configurations for domestically produced with the <unk> sells.
Justin Clare: For stationary storage and.
Justin Clare: As we work with our multiple battery suppliers to target what's necessary to support projects that would be completed in 2027.
Justin Clare: There are multiple pathways that could be employed in order to reduce the cost of tariffs.
Justin Clare: To the projects, we build and the price that we need customers to pay in order to make them economic.
Justin Clare: I think it's certainly our hope that U S policy.
Justin Clare: We will ultimately.
Justin Clare: Be configured in a way that gives supply chain time to respond and create the increasingly domestic or non China supply chain, that's consistent with national goals, but.
Justin Clare: As far as Clearway Energy, Inc. And Clearway group are concerned we have been able to manage and organize our business in a way that we can keep things on track and still deliver a resource that people want to pay for it.
Speaker Change: Okay got it really appreciate the answer.
Justin Clare: I'll pass it on thank you.
Speaker Change: Thank you one moment for our next question.
Speaker Change: Our next question comes from the line of Michael loan again from Evercore ISI.
Speaker Change: Hi, Thanks for taking my questions.
Speaker Change: So you are advancing repowering opportunities and other commitments pending a goat mountain in San Juan Mesa, you also highlighted a lot of other re powering opportunities through 2030, just wondering if you could talk about the caf. The yield you expect on these I know some recent Repowering Exhedra Hill was at 10% non storm 11 to 13.
Speaker Change: These levels compare to what you expect going forward.
Speaker Change: I think the guidance we've.
Speaker Change: We've given.
Speaker Change: Our investors and the analyst community when thinking about <unk>.
Speaker Change: Capital allocation on a going forward basis is that.
Speaker Change: We look to deploy capital at.
Speaker Change: Cash yields of at least 10%.
Speaker Change: And with.
Speaker Change: Our risk return proposition that creates value.
Speaker Change: In relation to our weighted average cost of capital.
Speaker Change: And which extends the runway of contracted newness in our revenues and cash flows and those same expectations are what we apply when evaluating additional investment opportunities for repowering investments in our fleet.
Speaker Change: When we value that investment.
Speaker Change: We assess the baseline amount of cap.
Speaker Change: We expect our non Repowering project to produce.
Speaker Change: The additional amount of Caf D and cash flow, we expect the Repowering project to produce.
Speaker Change: And we assess the cap the yield and the investment returns on the capital deployed against.
Speaker Change: Those increases two cavity and cash flow and EBITDA as compared to what we would expect the project to be generating where it not to be repowering.
We're pleased both with the commercial profile of projects like Mount Storm.
Speaker Change: Which now exhibits a 20 year PPA after completion.
Speaker Change: And Seadrome Hill, which gives a nice long life to that project with an existing customer who we value. We just completed the ribbon cutting for that project today.
Speaker Change: And outcomes like that or what we're targeting for the next projects ahead, and what we see and are proud of today is that the market values. These existing wind resources.
Speaker Change: Our ability to expand them or extend their life and <unk>.
Speaker Change: Just as I think we've indicated six months ago that this would be a policy resilient growth pathway for the company. We were pleased to see that proving out.
Speaker Change: Great. Thanks, and then obviously you signed the third party M&A agreement for the Solar project on April 25th just five days ago.
Speaker Change: The current economic uncertainty just wondering what are you broadly seeing in the M&A market would you say this was a unique opportunity to act on or what are you seeing in terms of activity and attractiveness of options.
Speaker Change: What we see right now is that.
Speaker Change: We're operating in a market with more balance between buyers and sellers of operating assets than we've seen in some time.
Speaker Change: Sellers still have options.
Speaker Change: And.
Speaker Change: Buyers continue to need to be rigorous and selective.
Speaker Change: For each of the two acquisitions that we've announced in the last six months.
Speaker Change: You will have seen that there is some unique synergistic benefit that clear way has been able to bring to bear on the project in the case of the most recent asset because of its proximity to other solar projects we operate already.
Speaker Change: In the case of the <unk> wind acquisition announcement because of a pre existing relationship with the off taker and <unk>.
Speaker Change: And our ability to potentially repower that project in the future with a track record of successfully doing that.
Speaker Change: And as we go forward and we look at other potential asset acquisitions.
Speaker Change: It's our intention that we would continue.
Speaker Change: To evaluate and execute on any applying the same principles that you see reflected in these deals, namely that they can be executed within our capital allocation framework that they exhibit return proposition at or better than the capital allocation expectations, we set with our public investors.
Speaker Change: And that there is something unique that clear way can bring to bear in order to enhance value and assure a good return for Clearway Energy Inc.
Speaker Change: So.
Speaker Change: There is certainly a market window right now where.
Speaker Change: We see opportunity to apply.
Speaker Change: Those advantages.
Speaker Change: With acquisitions that are secure and additive to our fleet.
Speaker Change: And to the extent that those can be acted on in a fashion that is supportive of our growth goals and consistent with our capital allocation framework, we will do that but we're glad to be able to do that from a position of strength, where what we're focused on now is hitting the top end or better of our out year goals.
Speaker Change: And being able to manage the sequencing of sponsor enabled development assets and acquisitions too.
Speaker Change: <unk>, a nice deliberate pathway for capital allocation for Clearway Energy Inc.
Speaker Change: Great. Thanks for taking my questions.
Speaker Change: Yep.
Speaker Change: Thank you one moment for our next question.
Speaker Change: Our next question comes from the line of Mark Jarvi from CIBC.
Mark Jarvi: Thanks, Good evening everyone.
Speaker Change: Craig maybe you can talk a little bit more about the willingness to assume and I guess in shares.
Speaker Change: Risks in terms of Ppas and the pass through would you say thats widespread across Counterparties, you're engaging with selective and then I guess when you think about it is that something you think will be pervasive across the industry or you think companies like yourselves, where you can find other tweaks.
Speaker Change: And solutions to maybe mitigate some of those costs make it easier for you to get your counterparty across the line to share some of those risks.
Mark Jarvi: Thanks for the question Mark.
Mark Jarvi: It's much more common in today's marketplace than it was six months ago and it was more common six months ago than at any time in the history of developing renewable power projects.
Mark Jarvi: I think.
Mark Jarvi: Really for the last five years.
Mark Jarvi: The industry has been presented with a succession as.
Mark Jarvi: Changes in the policy environment that are applicable to.
Mark Jarvi: Constructing and capitalizing.
Mark Jarvi: Long term contracted projects.
And.
Mark Jarvi: Over time.
Mark Jarvi: The combination of <unk>.
Mark Jarvi: Developers and customers.
Mark Jarvi: Have become increasingly accepting of the fact that.
Mark Jarvi: We need to work together with each other to adapt to changes in policy in order to enable resources that have to be constructed to meet demand to be built.
Mark Jarvi: And on.
Mark Jarvi: I think we.
Mark Jarvi: We are now at a point, where we have.
Mark Jarvi: Being able to reach agreements for how policy benefits or risk shared with regulated load serving entities in markets across the country.
Mark Jarvi: With commercial and industrial customers in markets across the country.
Mark Jarvi: And also.
Mark Jarvi: Sellers of equipment and project developers have started to develop manageable ways of.
Mark Jarvi: Establishing floors and ceilings on the cost of constructing projects. So that we can either do what we need to do together.
Speaker Change: I think customers are much more prepared to enter into those types of adaptable.
Mark Jarvi: Revenue contract structures with sponsors like ourselves.
Mark Jarvi: And with projects that are more mature where they feel that.
Mark Jarvi: What they're paying for is certainty that our resource will come online with an understanding that the exact cost of that resource might vary.
Mark Jarvi: On <unk>.
Mark Jarvi: For project debt.
Mark Jarvi: Less certain to be built with sponsors with a less effective track record than our own.
Mark Jarvi: Customers may be less prepared to enter into agreements of that nature, but I think as a whole what.
Mark Jarvi: End use customers and load serving entities recognizes that our country needs a tremendous campaign for the addition of both energy and capacity resources.
Mark Jarvi: And we need to find a way to work with each other to build them even as the policies that are applicable to them changed from time to time.
Speaker Change: That's good to hear so last question for me is just clarifying the comments on the equity needs was that were you, saying that you would need external equity. If you wanted to at least hit the top end or exceed the 227 targets.
Mark Jarvi: And I guess another question would be given all the progress youre, making.
Mark Jarvi: Predict with Repowering is another visibility beyond 2027, why don't you guys think you'd be in a position to extend the horizon in terms of the growth projections.
Mark Jarvi: Sure I'm going to start with.
Mark Jarvi: And to that question or both of them and then.
Mark Jarvi: To turn to you.
Mark Jarvi: Sarah.
Mark Jarvi: To follow on.
Mark Jarvi: No.
Mark Jarvi: First I think one of the things that we feel we have done right over the last year is to listen carefully to the community of investors, who support our company and to establish growth plans and capital allocation frameworks that are responsive to what they think should be.
Mark Jarvi: <unk> of our company.
Mark Jarvi: A company like ours and.
Mark Jarvi: One of the things that I think has been consistently communicated to us.
Mark Jarvi: By our investors is that they would like to see the company over time move in a direction, where its growth can be funded through its own cash flow and through.
Mark Jarvi: Ah prudently balance sheet prudently managed balance sheet and debt capacity.
Mark Jarvi: And that to the extent that we are making use of equity as a funding source for our growth that it is predictable and modest.
Mark Jarvi: You could sum all that up by saying if we can grow in a compelling way while living within our means that's what's optimal so it's our intention to do just that.
Mark Jarvi: With respect to.
Mark Jarvi: The the start.
Mark Jarvi: Equity issuances through the use of an ATM and how that fund our growth plan I think what we've indicated is that.
Mark Jarvi: To hit the top end of the $2 40 to $2 60.
Mark Jarvi: Range that we've articulated then if also aiming to hit the targets we have for credit ratings and so on that we.
Mark Jarvi: Would plan to make use of a modest amount of ATM issuance also just because we think it is healthy for a company like ours to be able to do that.
Mark Jarvi: But its not something thats, an absolute necessity and we took this step as you saw in our disclosures to sort of quantify a range of issuance that we have in mind over three years, which if quantified relative todays share price represents something like 1% of the flow of our C shares.
Mark Jarvi: So that's sort of the answer to the question with respect to equity issuance in.
Mark Jarvi: In terms of range and when we would articulate a new vintage beyond 2027 or revisit the commitments we've made for 2027.
Mark Jarvi: When we have historically done that as a company has been in the third quarter of the year. When we set guidance for for the next period of time.
Mark Jarvi: I think.
Mark Jarvi: That is the natural cadence when we would when we would update that long term expectation.
Mark Jarvi: Unless we reach some point between now and then where.
Mark Jarvi: The accumulation of committed investments that we have committed to.
Mark Jarvi: And other improvements in the fleet.
Speaker Change: Reach a point, where our expectations are materially in excess of the range. We've articulated already so but why don't you.
Speaker Change: Help fill in the details from our tier about how and when we do that second part.
Speaker Change: Yeah, I mean, I think you generally covered and Craig I think.
Speaker Change: We typically go through a robust budget process and long term plan.
Speaker Change: And that wraps up.
Speaker Change: In time for us to initiate guidance for the subsequent year.
Speaker Change: And potentially update long term targets.
Speaker Change: When we do our third quarter earnings call.
Speaker Change: I think we would anticipate that that pattern will continue.
Craig: Last to Craig's point.
Craig: Have something that occurs prior to that that would warrant.
Craig: In fact, given how our process works here I would.
Craig: Expect us to continue to update our.
Craig: Guidance initiation for the subsequent year and long term targets.
Craig: On our third quarter call and then in terms of.
Craig: What we would do to extend our longer term targets I think.
Craig: Also will be based upon the things that we're able to.
Craig: Included within that long term planning process. So.
Craig: <unk>.
Craig: Maybe not we're not giving specific.
Craig: Update, but I think that you could expect.
Craig: To do that later this year around the same time as we typically do.
Craig: Okay, well it seems like everything is on the right direction. Thanks for the time Tonight.
Craig: Yes, Thanks, Mark we think it is.
Speaker Change: Thank you one moment for our next question.
Speaker Change: Our next question comes from the line of Steve Fleishman from Wolfe Research.
Steve Fleishman: Yeah, Hi, thanks for the update.
Speaker Change: Could you just.
Steve Fleishman: New mines in terms of.
Steve Fleishman: Tax credit monetization.
Steve Fleishman: These projects new projects.
Steve Fleishman: How you are monetizing the tax credits.
Speaker Change: If youre using sensitivity at all.
Steve Fleishman: Yes.
Steve Fleishman: The capital structures that are put together for.
Steve Fleishman: Financing of our project.
Steve Fleishman: Generally makes use of traditional tax equity partnerships and which.
Steve Fleishman: Some portion of the depreciation.
Steve Fleishman: Most or all of the tax credit value is allocated for some financial institution are stable.
Steve Fleishman: Make use of those.
Steve Fleishman: In some cases those structures.
Steve Fleishman: That financial institution, the ability itself too.
Steve Fleishman: Transfer those tax credits.
Steve Fleishman: Senior separate party and.
Steve Fleishman: And to the extent that it does so in some cases.
Steve Fleishman: That can produce an additional financial benefit for Clearway group as a development company.
Steve Fleishman: But in all instances except for.
Steve Fleishman: Very limited ones, where we have remaining leakage of excess production tax credits.
Steve Fleishman: From projects that are at the very end of a PTC partnership where now on occasion at the end of a project.
Steve Fleishman: We're able to sell one or $2 million worth of production tax credits.
Steve Fleishman: For the benefit of Clearway Energy, Inc.
Steve Fleishman: Sure.
Steve Fleishman: The monetization of tax credits is through traditional partnerships and the risk of.
Steve Fleishman: Were tax credits are monetized.
Steve Fleishman: It is relevant to the development margin that Clearway group rooms on the project I think that gets at what you have in months.
Speaker Change: Yeah, Okay, I'm going to leave it there for now thank you.
Steve Fleishman: Yes. Thank you.
Speaker Change: Thank you one moment for our next question.
Speaker Change: Our next question comes from the line of Noah Kaye from Oppenheimer.
Speaker Change: Okay.
Noah Kaye: Hey, good afternoon, and thanks for taking the questions.
Speaker Change: It's notable perhaps.
Noah Kaye: The late stage pipeline.
Speaker Change: <unk> grew over a gigawatt sequentially.
Speaker Change: Amidst all this headline uncertainty for the space.
Speaker Change: So I want to commend you there didn't notice that some of the Seo do use within that to appear to shift from 'twenty six 'twenty seven two later on.
Speaker Change: During the period.
Speaker Change: Maybe just comment on factors around that.
Speaker Change: Implications if any for <unk>.
Speaker Change: Yes.
Speaker Change: Thanks for noticing thanks for the question, yes, so as I think you've seen over time no. One of the things that we do is move projects from development inventory from Clearway group.
Speaker Change: A round in deployment schedules in order to be.
Speaker Change: Responsive to the capital allocation framework.
Speaker Change: Growth needs of Clearway Energy, Inc, and what you see reflected in our pipeline reflects that kind of thinking.
Speaker Change: The benefit of.
Speaker Change: Some of the operating asset acquisitions, we've just completed.
We are in a position where what would be necessary to build to fully utilize all the capital that's available for Clearway Energy Inc to invest.
Speaker Change: And to hit the top end or better of the growth goals. We have articulated is more than sufficient and so the mode that we're in now is optimizing the succession of project development and construction schedules to fill in neatly into the growth plan that we've set out for <unk>.
Speaker Change: And there is.
Speaker Change: Say six or 800 megawatts worth of project that.
Speaker Change: We had pointed to 2027 that could either be completed in 2028 or in some cases late 2027.
Speaker Change: Where we ultimately build them will be a function of business decisions. We make in the next 12 months that look first to the capital that <unk> has available to allocate and.
Speaker Change: The growth goals that we've got for the business. So we feel as though we've been able to manage our pipeline.
Speaker Change: Pretty effectively in the current environment and it.
Speaker Change: Policy exposures are manageable.
Speaker Change: Right now in <unk>.
Speaker Change: As I think you'd probably noted the magnitude of the safe Harbor pipeline, we've created gives us tremendous optionality.
Speaker Change: At a very acceptable cost to clearway group to pick whichever project are.
Speaker Change: It's likely to present, the best risk. Adjusted addition to the <unk> portfolio and plan to construct those projects and the timelines we need to.
Speaker Change: Thank you.
Speaker Change: One moment for our next question.
Speaker Change: Our next question comes from the line of Angie <unk> from Seaport.
Speaker Change: Thank you.
Speaker Change: Question to ask.
Speaker Change: And answered.
Speaker Change: Maybe two questions.
Speaker Change: Any thoughts on <unk>.
Speaker Change: Energy margins for your gas plants in California, and then secondly.
Speaker Change: I mean.
Speaker Change: Should be an interesting months so the future of DRA and then also there is some.
Speaker Change: Some rumblings coming from the wind tower industry about permitting of projects and I'm wondering if you see any risks to.
Speaker Change: Repowering of wind projects those that already have the federal permits and those that are awaiting those permits.
Speaker Change: Do you think that theres any risks that those permits could be revoked or that.
Speaker Change: Any issue with that.
Speaker Change: It doesn't reload.
Speaker Change: PT snowcapped, sorry, when species for these projects depending on what happens with the IRI.
Speaker Change: Okay.
Speaker Change: So on energy margins and our outlook for the California fleet.
Speaker Change: Something you would have noticed in our financial results last year was that we.
Speaker Change: Part of the reason for why we outperformed that year was our success in managing that energy position inclusive of.
Speaker Change: Heat rate call options that helped us establish.
Speaker Change: Establish a revenue floor for that fleet.
Speaker Change: In a year, where dispatch was not as frequent and queso.
Speaker Change: We've been pleased to see as we go forward.
Speaker Change: As far out as three years from now are pretty support market for.
Speaker Change: The energy.
Speaker Change: Value of those assets and in fact, the further out in time you go the more we've seen.
Speaker Change: Appreciation in the expected.
Speaker Change: Energy gross margin creation potential of the assets right now.
Speaker Change: We feel good about.
The position of those assets in relation to.
Speaker Change: The amount of cap do we'd expect them to produce each year as part of our guidance and our five year plan both.
Speaker Change: What we would expect the market to bear and where we've been able to.
Speaker Change: Hedge modest amounts of of that capacity in a way that we think is risk aware.
Speaker Change: So it's as I think you know tens of millions of dollars of Kathy.
Speaker Change: Measured in sort of low one $1 50.
Levels that we count on for energy gross margin in that fleet and we feel constructive about the fleet fleets ability to continue to deliver that as we look into the out years based on actual market activity.
Speaker Change: And then on your question about the wind resources.
Speaker Change: The projects that we have incorporated.
Into our near term plans.
Speaker Change: Where we have signed ppas or are on the cusp of doing so have all the federal permits that are required.
Speaker Change: We.
Speaker Change: You need to make progress where necessary on.
Speaker Change: The later stage projects in our land based wind fleet.
Speaker Change: And I think we see a number of.
Speaker Change: Examples that.
Speaker Change: Land based wind projects that are being developed in a way that is.
Speaker Change: Appropriately thoughtful about the interests of.
Speaker Change: The various federal agencies that play roles in permitting them and local communities.
Speaker Change: Can still be permitted need to be constructed and deliver an energy value proposition that is increasingly necessary in our system, which has so much solar on the margin and won't see much guess felt for a while so we feel pretty good about that.
Speaker Change: And then on the IRI.
Speaker Change: Yes, I mean, I think what youre referencing is that we'll start to see markups from committees are parts of the IRI and we agree that that will happen and we also feel pretty good about.
Speaker Change: The constellation of.
Speaker Change: Important interests that are represented by members of Congress and the majority of both on the Senate and house side and how clear eyed. They are about the important role that renewable energy and batteries have to play in the states that they represent and then and then an energy system that short both energy and capacity. So we feel good about.
Speaker Change: The way, we planned our business for resiliency around change to the IRI, we expect some changes to it to occur.
Speaker Change: And.
Speaker Change: We are very very good.
Speaker Change: About the plans we have for Clearway Energy, Inc. In the short run.
Speaker Change: Looking equally resilience a year from now as they do today.
Speaker Change: Thank you.
Thank you at this time I would now like to turn the conference back over to Craig Cornelius for closing remarks.
Speaker Change: Thank you everyone for joining us today and for your ongoing support of Clearway, we look forward to continuing to deliver with excellence in the quarters ahead as we strive to set the gold standard for all of the above energy companies here in America, operator, you can close the call.
Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect.
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